General Financial Forecasting MCQs

1. True or False? Probability models are often used for financial forecasts.

2. The indicator approach takes into account:

3. True or False? Bayes theorem is often used in financial forecasting.

4. What are the two overarching financial forecasting approaches?

5. Which of the following is NOT a forecasted financial statement?

6. True of False? The longer the financial forecast, the more accurate it will be.

7. Which type of security is used as a measurement of a low risk rate?

8. Which of the following items would NOT be included in a cash budget?

9. What does DCF stand for?

10. Company XYZ has a project that requires an immediate investment of $100,000 which management has calculated to have discounted cash inflows of $105,000. This project is:

11. True or False? Present value is the future amount of money that is discounted to today.

12. What is the discount rate often used in capital budgeting that makes the Net Present Value (NVP) of all cash flows from a particular project equal to zero:

13. True or False? The Monte Carlo method is often used in modeling.

14. Management will use sensitivity analysis during financial forecasting to:

15. Projected financial statements are called:

16. True or False? Dividend structure and Capital structure are crucial to financial models

17. True of False? Forecasting future revenues is one of the most difficult aspects when preparing a financial forecast.

18. True or False? A foward price-earning ratio is an example of financial forecasting.

19. Which of the following helps create a financial model?

20. A cash forecast is an estimate of future inflows of revenue and _______?

21. True or False? Use of historical data is irrelevant to a financial forcast.

22. True or False? Predicting revenue is not part of financial forecasting.

23. True or False? Forecasting is based on historical information and assumptions.

24. What does EBIT stand for?

25. What is financial forecasting?

26. Which of the following could be used in financial forecasts?

27. The primary purpose of a cash budget is:

28. True or False? A sensitivity analysis is changing a value or an original assumption to see what effect it has on the overall model.

29. True of False? Forecasting future costs can be estimated by using historical data.

30. Financial forecasting is used for:

31. True or False? A Monte Carlo distribution could be a bell curve.

32. True or False? Financial forecasting can always predict future events.

33. A security that has a beta of less than 1 has __________?

34. True or False? Verification is the process of comparing actual results and predicted results.

35. What is the formula for compound interest?

36. Which of the following balance sheet items is NOT likely to vary directly with changes in revenue?

37. Which of the following capital budgeting techniques calculates the length of time required to recover the initial investment for a project?

38. True or False? The Bayesian Probablity method is used often for financial forecasting.

39. Which equation is best for forecasting future sales?

40. Which Method uses historical data as the basis of estimating future outcomes/information

41. True or False? The problem with Monte Carlo analysis is that you can only run one trial.

42. A company’s Sustainable Rate of Growth (SRG) is determined by which of the following:

43. Which of the following pro forma statements is likely to be calculated first while forecasting financials?

44. Which of the following is an example of financial forecasting?

45. The time series method:

46. True or False? Black swan events are typically included in financial forecasts.

47. Which of the following items is NOT likely found on a capital budget?

48. What is an example of qualitative forecasting technique?

49. The Delphi method is a type of:

50. Which of the following is not included under the quantitative forecasting method?

51. Which of the following is not included under the qualitative forecasting method?

52. True or False? Quantitative models typically use experts opinions to form future trends.

53. Which budget is prepared to determine how much external financing will be needed to support estimated sales?

54. The most encompassing means of financial forecasting is:

55. If a company has a low PE ratio and is expected to maintain profit, what do you expect the share price to do in the future?

56. The indicator approach is a type of:

57. True or False? A black swan is an example of an internality.

58. What does the x-axis of the security market line measure?

59. Companies with lower PEG ratios typically:

60. On the pro forma balance sheet, which of the following is normally the "plug" number inserted to "balance" the balance sheet?

61. If the yield to maturity > current yield > coupon yield, the bond is sold at a ______?

62. If a company has a very high forward PE ratio, what do you expect the share price to do in the future?

63. Companies with higher PEG ratios typically:

64. What is an advantage of the EV / EBITDA multiple?

65. How does market research differ from the delphi method?

66. True or False? Bayes theorem does not use balance sheets to make predictions.

67. The Black-Scholes model calculates the price of a:

68. Which of the following are important characteristics when identifying peer companies to use in firm valuation?

69. The Percent of Sales Method of financial forecasting will help to identify:

70. True or False? Prediction markets are informative markets that are created for the purpose of making market predictions.

71. Before they are updated, financial forecasts are typically used for:

72. A company has a post-money valuation of $500,000. The last investor put in $100,000. The pre-money valuation before the investor came in was _________________.

73. Why does a Balance Sheet balance (assets = liabilities + equity)?

74. The primary financial statements that are forecast are _________________.

75. Which is NOT an operating expense?

76. An operating budget in a corporate setting is usually prepared ________________.

77. Why would a company perform a variance/sensitivity analysis?

78. Depreciation on the Balance Sheet reflects ___________________.

79. For which company structure is it easiest to issue shares?

80. Why might someone forecast future years as one annual number?

81. Why is it reasonable for a startup company to forecast a Net Loss for several years?

82. Which represent three possible revenue streams for an online venture?

83. For a startup company looking to gain investor interest, which seems like a reasonable amount of time to forecast ahead?

84. Revenues on the Profit & Loss should be changed ___________________.

85. Is income tax forecasted?

86. Which would NOT be included on a summary page?

87. Which party should be kept in mind when creating a financial forecast?

88. What does an increasing trend in Accounts Payable indicate for a company?

89. The Net Income on the Cash Flow Forecast comes from the __________________.

90. Why is Change in Accounts Payable added back to Net Income?

91. To calculate a worst case scenario, a company would ____________ and ____________.

92. A capitalization summary would show ______________________.

93. Net Income on the Balance Sheet reflects _______________.

94. One method of calculating the valuation of a company is ________________.

95. The purpose of a worst case analysis is to _____________________.

96. Should a summary include metrics such as Gross Margin %?

97. Which would most likely be included on a summary page for Balance Sheet data?

98. Operating expenses should ____________________.

99. The Cash Flow Statement and the Balance Sheet linked in a dynamic forecast?

100. How is income tax forecasted?

101. In which way would typical Rent Expense be modeled?

102. The term 'burn rate' refers to ______________.

103. Capitalization is defined as ______________________.

104. In what way are the Income Statement and the Balance Sheet linked in a dynamic forecast?

105. Another way to express the Balance Sheet formula is ________________.

106. In which section would Change in Accounts Receivable be recorded?

107. Which decision could be made by looking at the Balance Sheet?

108. Which is the accepted format for a forecasted Balance Sheet?

109. Which of the following would be the most useful forecasting interval?

110. Why is it important to create assumptions for all possible changing variables?

111. The most logical formatting convention for assumptions would be ___________________.

112. Which decision would best be made by looking at cash flow?

113. To be as specific as possible, a revenue forecast should ______________.

114. Ad Revenue, which is revenue generated by placing advertisements of other companies on your site, can be modeled by _________________.

115. The majority ownership of a private company is typically held by __________________.

116. In general, a financial plan can be defined as _____________________.

117. Why would an investor be interested in a company's pre-money valuation?

118. In which section would a startup company record an investment by a venture capital firm?

119. The term 'revenue driver' refers to ____________________.

120. A simple method of calculating variance is to _________________.

121. Which is the accepted format for a forecasted P&L?

122. Purpose of a summary page?

123. Would it be better to create detailed input that individually forecasts expenses or to create a simple, one-line input for Operating Expenses?

124. A normal revenue model will _______________.

125. For most new ventures in the process of creating a forecast, the expense that warrants the most detailed analysis and input is _____________.

126. Overall, what is the purpose of a Cash Flow Statement?

127. What purpose does a central assumptions input tab serve in an Excel-based forecast?

128. Naming assumption cells is helpful because ____________________.

129. Companies calculate their valuation for the purpose of _____________________.

130. The basic formula for a Balance Sheet is __________________.

131. Which is the accepted format for a forecasted Cash Flow Statement?

132. Which would most likely NOT be included on summary financials?

133. Retained Earnings reflect ____________________.

134. Which would be a logical arrangement for showing revenue?

135. In a variance/sensitivity analysis, a company will typically calculate _________________.

136. How is Cash at the beginning of the period determined?

137. A company has a pre-money valuation of $1,000,000. An investor will invest $100,000. The post-money valuation is _________________.

138. Valuation can be calculated by ____________________.

139. Valuation will typically trend _______________.

140. Why would a company be conservative when projecting revenues?

141.

Valuation is a ______________________.

142. Another name for the Balance Sheet is ____________________.

143. Which would one expect to be the highest expense?

144. Which decision could be made by examining the Balance Sheet?

145. Which would most likely be included on a summary page for Income Statement data?